The new coronavirus (COVID-19) disease has directly and heavily affected many economic sectors, including aviation. The Ministry of Transport has asked the Ministry of Planning and Investment to report to the Prime Minister about a proposed reduction of several taxes and service prices for the aviation industry, helping it navigate the impacts of the outbreak.
A loss of VND30 trillion
According to Deputy Minister of Transport Le Anh Tuan, Vietnamese airlines have reported that the initial damage due to stopping routes is about VND30 trillion (US$1.3 billion).
As of March 15, airlines had stopped all flights to China and the Republic of Korea (RoK) and reduced 34% of flights to Chinese Taipei. Meanwhile, the Hong Kong (China) route had also decreased by nearly 72%, with the national flag carrier Vietnam Airlines operating only four flights a week as compared to 47 previously.
General Director of Vietnam Airlines Duong Tri Thanh said on March 19 that the corporation has had to temporarily stop all flights on international routes until April 30 due to the complicated developments of COVID-19 as well as the travel restrictions and border shutdowns undertaken by many countries.
In Southeast Asia, Vietnam Airlines has temporarily suspended flights between Vietnam and Singapore, Thailand, Indonesia, Laos, Cambodia and Myanmar since March 21. Routes between Vietnam and England and Japan have been cancelled since March 23 while those connecting Vietnam and China, Hong Kong (China), Macau (China), Chinese Taipei, RoK, France, Russia and Malaysia had been suspended earlier.
Director of the Civil Aviation Authority of Vietnam (CAAV) Dinh Viet Thang said that in the most optimistic scenario where the disease is under control by April, the total number of passengers for the period will reach 67 million, down 15.4% compared to 2019. In a worse situation when the epidemic is under control by June, the total market will reach only 61.2 million passengers, down 22.6% year-on-year.
According to the CAAV, China accounts for 26.1% of the passenger and cargo volume that domestic carriers transport to and from international destinations. The suspension of flights to China has consequently caused Vietnamese airlines to lose 400,000 passengers per month. They have also had to pay for ticket exchanges, cancellations, and sterilisation, the authority said.
Proposals to cut several taxes and service prices
At a meeting on March 12 with private economic groups including big companies in the tourism, services, aviation, food and manufacturing sectors, Prime Minister Nguyen Xuan Phuc asked ministers and the sectors to consider the exemption of several taxes and service prices for aviation industry.
Luong Hoai Nam, an airline expert, said that as regulated in Circular No. 53/2019/TT-BGTVT on the price and price range of aviation-related items at the airports and aerodromes of Vietnam, airlines now have to pay 16 service fees, which can amount to huge figures in VND every year. They have also to pay otherfees for the airports as well as taxes such as aviation fuel tax, environmental taxes, and income tax.
In its latest document, the Ministry of Transport proposed the Government assign the Ministry of Finance to consider the exemption of import tax and environmental protection tax on jet fuel for three months.
In a case of budget difficulties, it’s expected to cut 50% of import tax, environmental protection tax on jet fuel and allow enterprises to extend tax payment times and budget contributions.
The ministry also suggested the Government reduce take-off and landing prices, as well as flight operation service fees for departures and arrivals of domestic flights, by 50%, starting from March 1 to May 31, 2020, with the percentage able to be adjusted relative to the prevailing epidemic situation.
At the same time, the ministry asked the Government to apply a minimum tax and fee of VND0 for specialised aviation services, including catering, ramp and push back services, in order to create conditions for businesses to provide discount services for airlines and businesses.
Chairman of the Airports Corporation of Vietnam (ACV) Lai Xuan Thanh said that the COVID-19 epidemic and its impacts could result in a 40% decrease in the passenger volume through Vietnamese airports this year and international visitors will decrease by 70%. The corporation’s profit this year is predicted to decrease by VND10 trillion (US$426.5 million) compared to 2019.
In a move to cushion airlines from the COVID-19 impacts, the ACV on March 20 announced a reduction in airline service fees for six months from March to August this year for both domestic and international airlines.
Accordingly, ACV decided to reduce fees for a range of airline services at airports, including service fees for aircraft navigation (cut by 50%); and pipe ladder services, carousel rentals, automatic baggage handling, check-in counters and ground services (by 10%). The corporation will also waive office rental fees for airlines that have stopped flying, and reduce these by 30% for airlines that are still operating flights.